This Month in Gaming

A lot has happened in the last month for gaming companies, including a potential resurgence in Las Vegas gaming. For investors, the good news is that stocks are up for most companies and earnings have been improving.

Here are a few of the highlights I think are important, as well as a quick preview of the next month.

Las Vegas growthThe shocking number that came out recently was the 29% increase in gaming revenue on the Las Vegas Strip during January. That nearly matched the 34.8% increase in gaming revenue in Macau over the same period.

Before we call this a full-on recovery in gaming, let's put it into a little perspective. The Chinese New Year fell in January this year, instead of February, driving baccarat revenue up 199% from a year ago. Pai gow and mini-baccarat win also grew 372% and 78%, respectively, so the growth was definitely driven by Asian players who prefer these games.

Strip slot win actually declined slightly in January, a sign that a recovery is definitely not under way. So don't run out and buy shares of Caesars Entertainment (NAS: CZR) and MGM Resorts (NYS: MGM) just because growth was strong in January. Gaming win will likely come crashing back to earth in February, when the hard-core gamblers went home.

Drama at Wynn continuesThe "he said, she said" battle going on at Wynn Resorts (NAS: WYNN) reminds me of 4-year-olds fighting, except with lawyers involved. I'll try to make sense of it all with an analogy as childish as I see it:

Steve Wynn and Kazuo Okada built a lemonade stand (Wynn Resorts) in front of Steve's house (Las Vegas) that became very successful. They decided to expand to another stand in Kazuo's neighborhood (Macau), and after a while, Kazuo wanted to build another lemonade stand on a block by his house (the Philippines). But Steve said no. When Kazuo began building the lemonade stand himself, Steve got angry and got a bully to watch over Kazuo (former FBI director Louis Freeh, who investigated Okada). The bully found out that Kazuo had given free lemonade to his friends, and when he told Steve, Steve said Kazuo was no longer invited to his birthday party (fired him and evoked a clause to buy back Okada's shares). Kazuo went home crying to his mother (the U.S. courts), and now Steven and Kazuo's mothers are yelling at each other (the long court battle that has just begun).

And now, I probably won't be invited to Steve Wynn's birthday party.

Macau expansion is almost hereThe next piece of the Las Vegas Sands (NYS: LVS) empire is nearly ready for prime time. The last casino to be built in Macau until probably 2015 will open sometime in April, according to the company. The Sands Cotai Central will add another 6,000 rooms when finished and will complete a critical mass of resorts in the area.

For a while, the Venetian Macau was the only property on Cotai, a lonely position for a casino. Now, Melco Crown (NAS: MPEL) has added City of Dreams, Galaxy built a resort, and Las Vegas Sands has added the Four Seasons and Sands Cotai Central. This should make Cotai the main attraction in Macau, at least for convention-goers and entertainment-seekers.

Foolish bottom lineDespite a great month, I wouldn't count on a big bounce in Las Vegas Strip gaming revenue this year. I think the slow and steady improvements will continue, but even double-digit growth will be a stretch.

Wynn Resorts has a long battle ahead of it with this Okada mess. I still see Wynn coming out ahead in the end, but Okada has the resources to fight this in court, and his potential financial gain is enormous. I'll stay on top of it, so check back for more later.

I am excited to see how Sands Cotai Central performs compared to other Cotai resorts. I've made Las Vegas Sands my top gaming stock because if the resort outperforms my expectations then Las Vegas Sands would be less expensive than competitors. The impact on City of Dreams will also be important to keep an eye on. The extra rooms could help, but it could also steal some demand from its Cotai neighbor.

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